How AT&T is approaching the $1.5-trillion smart cities market

Smart cities initiatives earn buzz as a community outreach play, but tech companies have plenty of reasons to see the business value, too—about 1.5 trillion of them.

According to Frost & Sullivan, that’s how much the global smart cities market could be valued at by 2020, as people continue to flock to urban areas and cities look to leverage data and technology toward efficiency and safety.

AT&T’s (NYSE: T) transformation to more software-centric innovation has positioned it to grab a greater part of that enormous market, according to Mike Zeto, general manager of AT&T Smart Cities.

That’s already proving to be the case. Zeto met with representatives from Dallas in September of 2015 about a potential public-private partnership. This week, the result yielded the launch of the “Living Lab” in Dallas’ Historic West End. It’s a pilot program with smart LED streetlights, a digital kiosk, and environmental sensors.

Since partnering with Dallas, AT&T has joined with seven other entities: Atlanta; Georgia Institute of Technology; Chicago; Montgomery County, Maryland; Miami-Dade County; Portland; and Chapel Hill, North Carolina.

At the launch event for the Living Lab, I caught up with Zeto to talk about smart cities challenges, return on investment, and how to best innovate with smart cities data.

This was the start of it for AT&T. I started the business for AT&T that September (2015). We stood it up along the lines of how we stood up Connected Car and Digital Life as startups. We started working with Dallas first. Second city was Atlanta, then in conjunction with Georgia Tech, and then Chicago. And then we went from there.

They all have their own challenges when it comes to bringing all partners together. But when you think about the actual smart cities part of it—the fun stuff—do you look at all cities the same or are there unique challenges with each?

There’s a lot of common themes. Cities have similar sets of problems. They all want to drive efficiencies around cost. They all want to have the safest city in the world. They all want to provide employment opportunities. Where things start to become unique is where you find that a city has a more congested traffic problem than others. Where it gets regional is where you have a city like Atlanta that has a traffic problem versus a city like Chicago where people use public transportation—not to say they don’t have a traffic problem, but there’s more ways to get around it.

The common themes around smart cities are water—how to better manage water resources, decrease water loss, keep the quality levels up. Lighting—how do you generate efficiencies from smart lighting and then create a safer environment. Public safety.

And then, data—what do you do with all the data that comes from these connected things and how do you do something with it that’s meaningful and provides value to the citizens that live in these cities? That’s where things start to change. Some cities have CIOs that have come out of the private sector—a director or executive director at an IBM or a Cisco, and then they go do their stint in the public sector and they have really great ideas and understand how to make it all happen. And then you have some that are more public-sector careers, and they’re more hamstrung by that, in some instances.

Who handles the smart cities data?

The city owns the data, at the end of the day. In a smart city, the city will always own the data. Who hosts it securely—that will be a partner of theirs or a vendor. How you get access to it, the city will determine.

Do you open up the data that’s captured from the digital infrastructure solution that AT&T has and allow people at the (Dallas Entrepreneur Center) to innovate on top of it? I say you do. The more people that are innovating on top of the data that’s being derived from these sensors, will then come jobs, will then come investment, will then come an increase in GDP.

You can engage students in this early on and drive sustainability initiatives and coding projects for females or for minorities. There’s a lot of different ways you can take this to really leverage the power of the investment in becoming a smart city, and make it very equitable. It could be the gift that keeps on giving. If you have the right funding and you have the right partners, it should continuously be giving back to the community, and that should be the goal.

What’s the return of investment for AT&T to be a leader in smart cities?

From a Dallas perspective, we’ve made commitments to invest in Dallas. We’ve got $100 million we’ve committed to our downtown campus. We’ve got $22.9 million over the last couple years we’ve given to various giving projects. We’ve made an investment in this. That’s how we’re treating Dallas.

It’s a $1.5 trillion market. AT&T is more and more becoming not just a connectivity provider. We truly are a software company. We’re driving innovation, going up the stack, developing platforms and applications. We’ve got developer environments where we’ve got 25,000 developers involved in building and innovating on top of what we have.

We can capture more of that value chain than we could have four years ago because we’ve had an internal skills pivot, and changed our strategy to become more innovative and become more of a software company. That allows us to go different places with this.

That company down there in those towers was not the same company it was when I started three and a half years ago. I was the CEO of a software company that started in a place just like this. I was brought in by Ralph de la Vega, who was our vice chairman, to basically be an entrepreneur in residence and come up with the next thing. From that point three and a half years ago to today, the company down the street—while we’ve got the same core values—is night and day to what it was.